CITY OF TERRELL, TEXAS ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2007 This is trial version www.adultpdf.com This is trial version www.adultpdf.com CITY OF TERRELL, TEXAS TABLE OF CONTENTS SEPTEMBER 30, 2007 Page Number INTRODUCTORY SECTION Letter of Transmittal i – iv Organization Chart v Principal Officials vi FINANCIAL SECTION Independent Auditors’ Report 1 – 2 Management’s Discussion and Analysis 3 – 10 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets 11 Statement of Activities 12 – 13 Fund Financial Statements Balance Sheet – Governmental Funds 14 – 15 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 16 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 17 – 18 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 19 (continued) This is trial version www.adultpdf.com CITY OF TERRELL, TEXAS TABLE OF CONTENTS (Continued) SEPTEMBER 30, 2007 Page Number FINANCIAL SECTION (Continued) Fund Financial Statements (Continued) Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund 20 Statement of Net Assets – Proprietary Funds 21 Statement of Revenues, Expenses and Changes in Fund Net Assets – Proprietary Funds 22 Statement of Cash Flows – Proprietary Funds 23 – 24 Notes to Financial Statements 25 – 45 Combining Statements Nonmajor Governmental Funds Combining Balance Sheet 46 – 47 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 48 – 49 Internal Service Funds Combining Statement of Net Assets 50 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets 51 Combining Statement of Cash Flows 52 (continued) This is trial version www.adultpdf.com CITY OF TERRELL, TEXAS TABLE OF CONTENTS (Continued) SEPTEMBER 30, 2007 Page Number SINGLE AUDIT SECTION Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 53 –54 Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 55 – 56 Schedule of Expenditures of Federal Awards 57 Notes to the Schedule of Expenditures of Federal Awards 58 Schedule of Findings and Questioned Costs 59 – 63 Summary Schedule of Prior Audit Findings 64 This is trial version www.adultpdf.com THIS PAGE LEFT BLANK INTENTIONALLY This is trial version www.adultpdf.com INTRODUCTORY SECTION This is trial version www.adultpdf.com THIS PAGE LEFT BLANK INTENTIONALLY This is trial version www.adultpdf.com Hal Richards Mayor Ricky Jordan Mayor Pro tem Jack Jones Deputy Mayor Pro tem Tommy Spencer Council Member Don Thurman Council Member Torry L. Edwards City Manager Michael Sims Assistant City Manager April 7, 2008 The Honorable Mayor and Members of the City Council City of Terrell Terrell, Texas The Finance Department and the City Manager’s office are pleased to submit the basic financial statements for the City of Terrell, Texas (the “City”) for the fiscal year ended September 30, 2007. This report is published to provide the City Council, City staff, our citizens, our bondholders, and other interested parties with detailed information concerning the financial condition and activities of the City government. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is organized in a manner designed to fairly present the financial position and results of the City as measured by the financial activity of its various funds and account groups. We also believe that all disclosures necessary to enable the reader to gain the maximum understanding of the City’s financial affairs have been included. THE REPORT This report is presented in three sections: Introductory, Financial and Single Audit. The introductory section includes this transmittal letter, a listing of the City officials, and an organizational chart of the City. The financial section includes Management’s Discussion and Analysis (MD&A), basic financial statements and combining and individual fund statements and schedules, as well as the independent auditors’ report on the basic financial statements. The MD&A is a narrative introduction, overview, and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Terrell’s MD&A can be found immediately following the report of the independent auditors. The Single Audit section contains a schedule of federal expenditures and reports required by the Federal Single Audit Act of 1996. The financial section described above is prepared in accordance with generally accepted accounting principles for governments as prescribed by the Governmental Accounting Standards Board (GASB) and other professional associations, as applicable. P.O. BOX 310 • 201 E. Nash Street • Terrell, Texas 75160 • (972) 551-6600 The mission of the City Council of the City of Terrell, Texas, is to create pride by serving the community in a proactive manner and to enhance the quality of life through providing the highest level of services in the most efficient manner. This is trial version www.adultpdf.com ii CITY PROFILE Location The City of Terrell, Texas is located on U. S. Highway 80 just north of Interstate 20, and approximately 32 miles east of Dallas, Texas. The City, encompassing approximately 18.6 square miles, had a 2000 census population of 13,600 which is a 9% increase from the 1990 census population of 12,490. The City operates under the Council-Manager form of government. The City Council is comprised of the Mayor and four Council members, who enact local laws, determine policies and adopt the annual budget. The City Manager is appointed by the City Council and is responsible for the daily management of the City. The basic financial statements of the City include all government activities, organizations and functions for which the City is financially accountable as defined by the GASB. Based on these criteria, no other governmental organizations are included in this report. Services Provided The City provides to its citizens those services that have proven to be necessary and meaningful and which the City at the least cost can provide. Major services provided under general government and enterprise functions are: police and fire protection, water and sewer services, sanitation services, park and recreational facilities, library services, street improvements and general administrative services. The City also offers an airport. Internal services of the City accounted for on a cost reimbursement basis, are the fleet services operations and employee health coverage. Accounting System and Budgetary Control The City’s accounting records for general governmental operations are maintained on a modified accrual basis, with the revenues being recorded when available and measurable and expenditures being recorded when the services or goods are received and the liabilities are incurred. Accounting records of the City’s utilities and other proprietary activities are maintained on the accrual basis. In developing and maintaining the City’s accounting system, consideration is given to the adequacy of the internal control structure. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur within the above framework. We believe that the City’s internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. The City charter provides that the City Council shall adopt the annual budget prepared by City Management. This budget is reviewed by the City Council and is formally adopted by the passage of a budget ordinance. The City Manager is authorized to transfer budgeted amounts between line items and departments within any fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. Budgetary control has been established at the individual fund level. Financial reports are produced showing budget and actual expenditures by line item, and are distributed monthly to City departmental and divisional management and to others upon request. Individual line items are reviewed and analyzed for budgetary compliance. Personnel expenditures are monitored and controlled at a position level and capital expenditures (items over $5,000 and having a useful life of three or more years) are monitored and controlled item by item. Revenue budgets are reviewed monthly. This is trial version www.adultpdf.com . CITY OF TERRELL, TEXAS ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2007 This is trial version www.adultpdf.com This is trial version www.adultpdf.com CITY OF TERRELL, TEXAS TABLE OF. and the City Manager’s office are pleased to submit the basic financial statements for the City of Terrell, Texas (the City ) for the fiscal year ended September 30, 2007. This report is. version www.adultpdf.com CITY OF TERRELL, TEXAS TABLE OF CONTENTS (Continued) SEPTEMBER 30, 2007 Page Number SINGLE AUDIT SECTION Report on Compliance and on Internal Control Over Financial